Order 2013-2-7

 UNITED STATES OF AMERICA

 DEPARTMENT OF TRANSPORTATION

 OFFICE OF THE SECRETARY

 WASHINGTON, D.C.

Issued by the Department of Transportation

On the Seventh day of February, 2013

Sky King, Inc.

Docket OST 2013-0004

Violations of 49 U.S.C. § 41712 and 

14 CFR Parts 212 and 380

Served February 7, 2013

CONSENT ORDER

This consent order concerns violations of certain consumer protection provisions of the 

Department of Transportation’s Public Charter regulations by Sky King, Inc., (Sky King) a direct 

air carrier for a number of Public Charter programs filed by Southern Sky Air & Tours, d/b/a 

Myrtle Beach Direct Air & Tours (Direct Air). In violation of 14 CFR Parts 212 and 380, Sky 

King operated numerous Public Charter flights on behalf of Direct Air without first receiving the 

full charter price for those flights, thereby operating on the basis of prospective payments or 

credits and it failed to make reasonable efforts to ascertain before undertaking Public Charter 

flights that the charter operator was in compliance with 14 CFR Part 380. In addition, 

subsequent to the cessation of Direct Air’s operations and in violation of 14 CFR Parts 212 and 

380, Sky King cancelled charter flights less than ten days before the scheduled departure date 

and failed to return to their points of origin all passengers who purchased round-trip 

transportation on Sky King-operated Public Charter flights and whom Sky King had already

transported on their outbound flights. These activities constituted unfair and deceptive practices

and unfair methods of competition in violation of 49 U.S.C. § 41712. This order directs Sky 

King to cease and desist from future violations of section 41712 and the aforementioned Federal 

regulations and assesses the carrier a compromise civil penalty of $500,000.

Applicable Law

Public Charter operators and direct air carriers must comply with the requirements of 14 CFR 

Parts 212 and 380, which are designed to prevent economic harm to and the stranding of charter 

passengers. Under 14 CFR 380.34(b)(ii), the Public Charter operator’s depository bank must pay 

to the direct air carrier’s depository bank the funds owed to the direct air carrier no more than 60 
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days prior to the flight’s operation. Under 14 CFR 212.3(e) and 380.11, the full charter price 

must be received by the charter carrier prior to the operation of the pertinent flight. Pursuant to 

14 CFR 380.40, “A direct air carrier shall not perform air transportation in connection with such 

a charter unless it has made a reasonable effort to verify that all provisions of this part have been 

complied with.” See also 14 CFR 212.3(d). Moreover, 14 CFR 380.43 prohibits the cancellation 

of charter flights less than ten days before the scheduled departure date and 14 CFR 212.3(f)

charges the direct air carrier with the responsibility of ensuring the return at no additional cost of 

all U.S.-originating, round-trip passengers whom the carrier has transported on their outbound 

leg.

In addition, violations of 14 CFR Parts 212 and 380 also constitute violations of 49 U.S.C. 

§ 41712, which prohibits carriers from engaging in unfair and deceptive practices and unfair 

methods of competition.

Facts and Conclusion

Sky King was the direct air carrier in the Public Charter program covered by Public Charter 

Prospectus 11-045, which involved 3,052 flights on a variety of routes between cities in the 

Midwest and Northeast and points in Florida and Myrtle Beach, South Carolina, for the period 

from September 7, 2011, to November 16, 2012. The Public Charter operator was Southern Sky 

Air & Tours, d/b/a Myrtle Beach Direct Air & Tours (Direct Air). 

Beginning with flights departing on January 18, 2012, sufficient funds were not transferred from 

Direct Air’s escrow account to Sky King prior to the operation of the pertinent flights. Sky King 

thus had early notice that Direct Air was not complying with the Department’s Public Charter 

regulations. At this time, pursuant to 14 CFR 212.3(d) and 380.40, Sky King should have 

undertaken reasonable efforts to verify that Direct Air was operating in compliance with Part 

380. Rather, Sky King suffered Direct Air’s conduct and, in violation of 14 CFR 212.3(e) and 

380.11, continued to operate flights listed in Public Charter Prospectus 11-045 without requiring

from Direct Air payment in full of the total charter price. By March 13, 2012, Direct Air owed 

$951,536 to Sky King for flights Sky King had completed on Direct Air’s behalf. 

On March 13, 2012, Sky King ceased all flights under the Public Charter program. The Office of 

Aviation Enforcement and Proceedings (Enforcement Office) immediately contacted Sky King 

about this matter. The Enforcement Office reminded Sky King of the carrier’s obligations under 

14 CFR 380.43 to not cancel charter flights less than ten days before the scheduled departure 

date and under 14 CFR 212.3(f) to return all passengers who had purchased round-trip 

transportation and whom it carried on their outbound journeys. Nevertheless, Sky King failed to 

ensure the return of stranded passengers.

Mitigation

By way of mitigation and explanation, Sky King states that it believes that a large-scale fraud has 

been committed by Direct Air and its managers and owners on a whole variety of parties, 

including, among others, all of the Direct Air passengers, the U.S. government and its various fee 

and taxing agencies, various local governments and airport authorities, as well as many 

commercial creditors, including the direct air carriers employed by Direct Air such as Sky King. 
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As a direct result of the alleged illegal activities of Direct Air and its owners and managers, Sky 

King states that it suffered substantial financial losses causing Sky King to file for Chapter 11 

bankruptcy court protection. The Direct Air Chapter 7 bankruptcy liquidation is currently 

pending before a U.S. bankruptcy court and Sky King states that it believes that the activities of 

Direct Air’s owners and managers are currently under investigation by the Chapter 7 trustee.

In the week immediately following the Direct Air collapse, Sky King states that it attempted 

repeatedly to establish a schedule of flights to repatriate stranded Direct Air passengers; 

however, Direct Air failed to respond to any of Sky King’s attempts to communicate with it, and 

because Sky King lacked access to passenger information required by the Transportation 

Security Administration (TSA), Sky King was unable to operate the repatriation flights, except 

for one flight on the day of the Direct Air collapse for which Sky King did have the TSArequired passenger information.

As a result of Direct Air’s alleged misconduct and that of its managers and owners, in addition to 

being obliged to seek Chapter 11 bankruptcy court protection and the instant Department action, 

Sky King asserts that it has suffered substantial financial loss. In addition, according to Sky 

King, further harm to the carrier occurred when the majority of Sky King’s small fleet of aircraft 

had liens placed on them by another Direct Air creditor rendering Sky King in default on its 

aircraft leases, making its fleet subject to seizure at any time.

Decision

The Department takes compliance with the Federal aviation statutes and regulations very 

seriously. The Enforcement Office has carefully considered the information provided by Sky 

King but continues to believe that enforcement action is warranted. The Enforcement Office and 

Sky King have reached a settlement of this matter in order to avoid litigation. Sky King consents 

to the issuance of an order to cease and desist from future violations of 49 U.S.C. § 41712 and 14 

CFR Parts 212 and 380 and to the assessment of $500,000 in compromise of potential penalties 

otherwise due and payable pursuant to 49 U.S.C. § 46301.

This compromise assessment is appropriate considering the nature and extent of the violations 

described herein and serves the public interest. It represents a strong deterrent to future 

noncompliance with the Department’s Public Charter requirements.

This order is issued under the authority contained in 49 CFR Part 1. 

ACCORDINGLY,

1. Based on the above discussion, we approve this settlement and the provisions of this 

order as being in the public interest;

2. We find that Sky King, Inc., violated 14 CFR 212.3(d) and 380.40 by failing to make 

reasonable efforts to ascertain before undertaking Public Charter flights that the 

charter operator was in compliance with 14 CFR Part 380;
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3. We find that Sky King, Inc., violated 14 CFR 212.3(e) and 380.11 by transporting 

passengers without having first received from the charter operator full payment of 

the total charter price;

4. We find that Sky King, Inc., violated 14 CFR 380.43 by cancelling charter flights 

less than ten days before the scheduled departure date;

5. We find that Sky King, Inc., violated 14 CFR 212.3(f) by failing to return to his or 

her point of origin each passenger who purchased round-trip transportation on its 

Public Charter flights, and whom Sky King, Inc., transported on his or her outbound 

flight;

6. We find that by violating 14 CFR Parts 212 and 380, as described in ordering 

paragraphs 2, 3, 4, and 5, above, Sky King, Inc., engaged in unfair and deceptive 

practices and unfair methods of competition in violation of 49 U.S.C. § 41712; 

7. We order Sky King, Inc., and all other entities owned or controlled by, or under 

common ownership and control with Sky King, Inc., and its successors, affiliates,

and assignees, to cease and desist from future violations of 49 U.S.C. § 41712 and 

14 CFR Parts 212 and 380. Failure to comply with this cease and desist provision 

shall subject Sky King, Inc., and its successors, affiliates, and assignees to further 

enforcement action; and

8. We assess Sky King, Inc., $500,000 in lieu of civil penalties that might otherwise be 

assessed for the violations described in ordering paragraphs 2, 3, 4, 5, and 6, above. 

The total penalty amount of $500,000 shall be included in any proof of claim filed 

by the U.S. Department of Transportation in the Sky King, Inc., bankruptcy case.

This order will become a final order of the Department ten days after its service date unless a 

timely petition for review is filed or the Department takes review on its own initiative.

BY:

SAMUEL PODBERESKY

Assistant General Counsel for

Aviation Enforcement and

 Proceedings

An electronic version of this document is available

at www.regulations.gov